Thinking about contract restructuring

[Thurman#1]

13 hours ago, BigAl2526 said:

It's well known by Bills fans that Brandon Beane restructured a number of contracts in order to create cap space the Bills could use to sign free agents.  That got me to wondering.  Why didn't the Bills write the initial contracts in a more cap friendly way instead of having to restructure.   Is it possible that the initial contracts are written the way they are in order to provide for mor flexibility down the road?  

 

With one of the highest payrolls in the league, are the Bills likely to have continuing cap troubles next year and beyond.  I think in theory, that could be exacerbated by all the restructuring.  Restructuring normally involves converting salary to bonus money.  Big prorated bonuses create dead cap money issues when and if those players are cut.

 

I like the way Beane has built this team and I think the recognition he enjoys as one of the top GMs in the league is well deserved, but it there is something to be concerned about, the cap issues might be it.

 

 

Contracts are differently cap-friendly or unfriendly every year, as the salaries and bonuses generally go up and down each year.

 

And why didn't they write them better? A lot of that is because generally when a GM writes his contract in as cap-friendly a way as possible, he then unfortunately has to give it to the player, whose reps will have problems with it. Contracts have to be agreeable to both sides. They're a compromise.

 

More, as the contract ages, the player ages. He becomes better or worse, cagier and tougher or more lackadaisical, maybe better conditioned but older. But beyond that, the environment changes. When the contract is signed, it makes the player maybe the 3rd highest paid WR in terms of Average Annual Value. Three years later maybe he's a much better player and he's 24th highest. You're going to have to give him an extension, but you want to wait a year or two so re-structuring moves some cash forward, making the player happy and delaying the need for an extension. And the team's overall cap situation changes and affects the contracts and the team's happiness with it. 

 

It's wildly complex, but basically the environment is fluid. Things change all the time.

 

The cap issues absolutely have major impact on the team and what you can do. It really is a concern.

 

Beane came in with a plan to stay pretty conservative on cap issues. He also had a plan to clear cap space and over the course of three or four years put together a roster within that conservative framework. The changing situation from year to year means you'll spend a bit more one year and a bit less the next as needs and situations change. 

 

But just as their roster got better and their QB entered his years of Super Bowl competitiveness, Covid hit and it seriously reduced cap totals across the league. This threw Beane's plans well off-target. He had to either cut some guys that would make the team competitive or write contracts that would make the cap tighter in future years. 

 

He chose the second option. It's why the roster is excellent, but the cap is tight and causing restriction. He'll be trying to get to his original goal of a solid core of well-paid guys and a nimble use of low- to mid-range FAs seeded in and being conservative with future cap. Getting back there can be done, but it's a lot harder from where we are now than it would have been from the situation we'd have been in without the Covid cap hit. it's possible, but there will be roster consequences.

[Thurman#1]

11 hours ago, Buffalo_Stampede said:

As long as Josh plays at an elite level we’ll just keep pushing his cap into the future. Eventually it’ll catch up but that’s a long way away, maybe a decade.

 

 

It might indeed be five or six years before we have major cap consequences, but we are already seeing smaller effects. There would be small consequences and moves that go unmade every year if they did just keep over-kicking cans. I don't think they'll do that, myself.

[Thurman#1]

14 hours ago, ddaryl said:

Winning teams will always have cap concerns. We could return to the days where we had oodles of cap space, but it comes at a cost none of us are willing to pay.

Beane's plan marches out a few years IMO. Yes we will have decisions to make, but I am not worried. Beane =Gandalf the White when comes to salary cap.

 

 

There have been plenty of winning teams that didn't have serious cap concerns. The winningest team in the last twenty years, for one.

 

Every team makes choices they wouldn't make in an uncapped environment, but plenty of excellent teams didn't keep digging themselves into cap holes all the time.

 

Agreed, though, that Beane is really good at cap stuff.

[PrimeTime101]

14 hours ago, ddaryl said:

Winning teams will always have cap concerns. We could return to the days where we had oodles of cap space, but it comes at a cost none of us are willing to pay.

Beane's plan marches out a few years IMO. Yes we will have decisions to make, but I am not worried. Beane =Gandalf the White when comes to salary cap.

https://giphy.com/clips/hamlet-lord-of-the-rings-gandalf-you-shall-not-pass-BZMggpshzrPvbfQHIF

[BigAl2526]

On 5/20/2022 at 12:03 PM, Ethan in Portland said:

The most common maneuver is to take salary and convert it to a signing bonus. When the player signs his contract they get one bonus and a salary for a number of years. You can't write a contract with a series of signing bonuses.  You just have to covert them if you want every year.  Additionally if you put all the money into a signing bonus up front and the player doesn't work out then it becomes a large dead money cap hit.  Not every contract/player signed will work out.  So you have to hedge your bets.  

Good thoughts  You make a lot of sense.

[Ethan in Cleveland]

On 5/20/2022 at 10:30 PM, Thurman#1 said:

 

 

There have been plenty of winning teams that didn't have serious cap concerns. The winningest team in the last twenty years, for one.

 

Every team makes choices they wouldn't make in an uncapped environment, but plenty of excellent teams didn't keep digging themselves into cap holes all the time.

 

Agreed, though, that Beane is really good at cap stuff.

The Patriots often traded away or let walk their high priced talent like Seymour, Veniteri, and Welker to just name a few.

[DrDawkinstein]

7 hours ago, Ethan in Portland said:

The Patriots often traded away or let walk their high priced talent like Seymour, Veniteri, and Welker to just name a few.

 

And never had to pay Brady market rate.

 

 

[Paul Costa]

On 5/20/2022 at 1:49 PM, DCbillsfan said:

Check out Joe Marino on Locked on Bills via Youtube.  He talked about next off season and possible restructuring moves by Beane.  It's about 30 minutes long.  If you don't have the time.  The short answer is restructure Allen's contract I.e. convert a chunk of his salary to signing bonus.  

To expand on this just a little he showed a path to get to 50 or 60 million with some restructuring & cuts. Josh & Diggs & Dawkins we’re the big ones to restructure.

Edited May 23, 2022 by Paul Costa

[HereComesTheReignAgain]

30 minutes ago, DrDawkinstein said:

 

And never had to pay Brady market rate.

 

 

Can Allen come up with some BS snake oil elixir and therapy program that the Bills pay him for?  Seemed to work well for Brady and the Pats*

[T master]

Can you restructure a restructured deal 🤔 and then restructure it again at a later date ?? 

 

Hey just give out IOU's then it won't go against the cap or will it ?? 

[Buffalo_Stampede]

10 minutes ago, T master said:

Can you restructure a restructured deal 🤔 and then restructure it again at a later date ?? 

 

Hey just give out IOU's then it won't go against the cap or will it ?? 

Yes you can keep doing it. Basically the Bills could extend Josh Allen again, give him huge up front money and push a lot of cap into the future. They could easily create 10’s of millions in cap space every year doing this. They can do it with other players as well, not to that extent.

 

The problem is players can’t play at a high level forever. So that is risk. Plus injury can change the plans very quickly. You have to pay that cap at some point, it doesn’t disappear. You don’t want to get hit with huge cap numbers for a player that can’t perform at a top level anymore. Now you’ll likely have to release the player and have huge dead cap. 

[DrDawkinstein]

32 minutes ago, T master said:

Can you restructure a restructured deal 🤔 and then restructure it again at a later date ?? 

 

Hey just give out IOU's then it won't go against the cap or will it ?? 

 

13 minutes ago, Buffalo_Stampede said:

Yes you can keep doing it. Basically the Bills could extend Josh Allen again, give him huge up front money and push a lot of cap into the future. They could easily create 10’s of millions in cap space every year doing this. They can do it with other players as well, not to that extent.

 

The problem is players can’t play at a high level forever. So that is risk. Plus injury can change the plans very quickly. You have to pay that cap at some point, it doesn’t disappear. You don’t want to get hit with huge cap numbers for a player that can’t perform at a top level anymore. Now you’ll likely have to release the player and have huge dead cap. 

 

Restructure =/= New Extension though.

 

With these Restructures where they convert salary to bonus, they are simply kicking the hit for this year's salary down the road but within the same contract. So that does add up in the later years, and as you state, it WILL come due eventually.

 

So yes, you could restructure every year. But then in the last year of the contract, the cap hit will basically be the amount of the entire contract. So pay $20M/year now, or $100M in all one year.

[Shaw66]

On 5/21/2022 at 12:42 AM, Thurman#1 said:

 

 

Contracts are differently cap-friendly or unfriendly every year, as the salaries and bonuses generally go up and down each year.

 

And why didn't they write them better? A lot of that is because generally when a GM writes his contract in as cap-friendly a way as possible, he then unfortunately has to give it to the player, whose reps will have problems with it. Contracts have to be agreeable to both sides. They're a compromise.

 

More, as the contract ages, the player ages. He becomes better or worse, cagier and tougher or more lackadaisical, maybe better conditioned but older. But beyond that, the environment changes. When the contract is signed, it makes the player maybe the 3rd highest paid WR in terms of Average Annual Value. Three years later maybe he's a much better player and he's 24th highest. You're going to have to give him an extension, but you want to wait a year or two so re-structuring moves some cash forward, making the player happy and delaying the need for an extension. And the team's overall cap situation changes and affects the contracts and the team's happiness with it. 

 

It's wildly complex, but basically the environment is fluid. Things change all the time.

 

The cap issues absolutely have major impact on the team and what you can do. It really is a concern.

 

Beane came in with a plan to stay pretty conservative on cap issues. He also had a plan to clear cap space and over the course of three or four years put together a roster within that conservative framework. The changing situation from year to year means you'll spend a bit more one year and a bit less the next as needs and situations change. 

 

But just as their roster got better and their QB entered his years of Super Bowl competitiveness, Covid hit and it seriously reduced cap totals across the league. This threw Beane's plans well off-target. He had to either cut some guys that would make the team competitive or write contracts that would make the cap tighter in future years. 

 

He chose the second option. It's why the roster is excellent, but the cap is tight and causing restriction. He'll be trying to get to his original goal of a solid core of well-paid guys and a nimble use of low- to mid-range FAs seeded in and being conservative with future cap. Getting back there can be done, but it's a lot harder from where we are now than it would have been from the situation we'd have been in without the Covid cap hit. it's possible, but there will be roster consequences.

I find I keep coming back to this post, because it's so good.   It captures the complexity and the fluidity of contract issues.   And there are judgments to be made along the way.

 

As I said in an earlier post, the fundamental objective is in the current year, and in your planning for future years, not to be taking cap hits on talent that isn't worth the hit.  You don't want cap hits for players who aren't on your roster any longer, and you don't want cap hits in large dollar amounts for players on your roster who play well below the value of the cap hit.  You don't want to write a big contract to Mario Williams and then find out that he just was no longer going to play at a Mario Williams level.   Von Miller was a great signing - he's worth the dollars, and Beane is willing to work around the cap restrictions the Miller contract may bring for a couple of years.   Unless, of course, Miller retires on the job - he shows up and goes through the motions and isn't the guy you want on the field on third and nine with six minutes left in a playoff game.  

 

If you have plenty of cap room, like the Patriots often did, the question is "why didn't you bring in more talent?"   If you have the room, why don't you make the team better.   I never understood why Belichick would do that.   I'd rather find the right guy and add him to the roster.  But as you do that, you shrink your cap room, and that of course is a risk, because you never can be sure what the future will bring.  Injuries, guys retire early, they don't pan out, all sorts of things happen, and if you're tight on cap space, you're less able to respond.  It is, as you say, a balancing act.  But there's practically no one here saying the Bills should have passed on Miller so that they would be in a more comfortable cap situation.  

 

I have a good deal of confidence that Beane has enough flexibility in future seasons (with restructures, increases in the cap, trades, etc.) that he is confident that he will have sufficient room to maneuver and make the moves to keep the team competitive from a talent point of view. 

[benderbender]

If Beane was truly reckless with the cap, he would have freed up space for Bradberry. Could you imagine Tre White bring free to take his time coming back to be the cherry on top of our defense? It would have wrecked the league before it even had the chance to check itself. And you must give one the sporting chance to check oneself before allowing themselves to wreck themself. It is only good manners. 

[Buffalo_Stampede]

17 minutes ago, DrDawkinstein said:

 

 

Restructure =/= New Extension though.

 

With these Restructures where they convert salary to bonus, they are simply kicking the hit for this year's salary down the road but within the same contract. So that does add up in the later years, and as you state, it WILL come due eventually.

 

So yes, you could restructure every year. But then in the last year of the contract, the cap hit will basically be the amount of the entire contract. So pay $20M/year now, or $100M in all one year.

You wouldn’t do that with Josh, you would extend him so you can kick the cap down further.

 

Restructures and extensions can be very similar. I mean you’re just modifying the current contract. In the case of an extension you’ll be adding money to the player. But as a benefit to the team you can spread the cap out more season.

 

Thats exactly what happened with Diggs. Extension created cap space this season even though Diggs got a big boost in pay.

Edited May 26, 2022 by Buffalo_Stampede